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Due to the Recession, Electric Power Markets in Ontario and Québec are in a Strange Space

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Alex Carrick

Positions:
Alex Carrick is Chief Economist for CanaData, Reed Construction Data’s Canadian economic forecasting and statistical service.

Economists

The recession is having impacts on construction in ways that may not, at first, be readily apparent. For example, electric power usage in North America is currently in what might be termed a brief hiatus. Longer-term, it is hard to image that the need for electricity can be anything but expansive. This will be particularly true for power that can be generated in an environmentally friendly way. However, in the short-term, with raw materials production and manufacturing in recessionary decline, power usage has dropped.

The recession is having impacts on construction in ways that may not, at first, be readily apparent. For example, electric power usage in North America is currently in what might be termed a brief hiatus. Longer-term, it is hard to image that the need for electricity can be anything but expansive. This will be particularly true for power that can be generated in an environmentally friendly way. However, in the short-term, with raw materials production and manufacturing in recessionary decline, power usage has dropped.

Reasons for Power Usage Cutbacks

Some of the cutbacks in power consumption have occurred in metals production. For example, making aluminum requires prodigious amounts of power and lower demand for air and ground transportation products has lowered output levels. Reduced levels of activity in manufacturing are another cause. Steel and auto demand are down and there have been mill shutdowns and plant closings, such as General Motors/' full-size truck plant in Oshawa − where Silverados and Sierras were formerly assembled.

Hydro Quebec Expansion Plans – Romaine River

Furthermore, the drop in demand comes at a time when most electric power utilities in Canada are aggressively pushing expansion plans. For example, Hydro Quebec has just launched its Romaine River hydroelectric power project at an estimated cost of $6.5 billion. This will see the construction of four hydroelectric dams on the major river that flows south into the Gulf of St. Lawrence across the land mass that lies below Labrador. When completed in 2020, it will provide enough power for 450,000 households.

The province already has extra power capacity. In its most recent financial statement, a net profit of $3 billion was reported thanks to exports to the U.S. and other parts of Canada. Hydro Québec is looking to export a portion of Romaine power either to Ontario or states in the U.S. northeast. A new transmission line is being built to Ontario.

Ontario Hydro Nuclear Program at Darlington

In the meantime, the Ontario government has scheduled June 21 as its announcement date for the choice of a project manager to build four new nuclear power stations at Darlington. Canada/'s-own AECL is believed to have the inside track, ahead of the other two competitors, Areva of France and a Westinghouse/Toshiba joint venture. The projected cost of this expansion program is a staggering $26 billion Canadian.

Meanwhile, the agency that monitors Ontario/'s electricity supply and demand says that 2009 and 2010 will be the fourth and fifth straight years of lower power consumption. Besides the recession and plant closings, the push for energy conservation is having an impact. Also, total capacity is being augmented by small-scale renewable energy projects.

Bottom Line

The bottom line is that the new power will not be needed as quickly as assumed initially. However, lead times on these projects are so long that it would be unwise to delay go-aheads. If indeed there is to be an era of smaller more fuel-efficient cars in our future, operating on plug-in or hybrid systems, then adequate capacity cannot be left to chance.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.

by Alex Carrick

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